Saturday, August 9, 2014

Well, the time has come to update the Freedom Fund once again as we start another month. The Freedom Fund is my portfolio, and I think it’s aptly named. My portfolio is my way to freedom; freedom from a job I don’t desire to purchase goods I don’t need to impress neighbors I don’t care about. This journey is all about freedom and flexibility. One day the dividend income this portfolio generates will fully cover my expenses and my time will be completely my own. What could you possibly want to own more than your time?

I feel extremely fortunate and thankful that I’m able to post these updates every single month which shows the power of monthly contributions to investments because of the high savings rate I maintain. It shows how a relatively large sum of money can be built through the power of time, patience and perseverance.

It’s important to keep in mind that while updating the overall value of my portfolio is important for historical reference and for purposes of keeping track of total return, my main focus is on the rising dividend income stream the Fund provides.

August was more of the same, as you readers have come to expect. After discussing a couple of low-yield, high-growth opportunities on my watch list for a potential July purchase, I went ahead and pulled the trigger on initiating a position in Visa Inc. (V). Shortly thereafter, I found what I thought to be fairly compelling value in Deere & Company (DE) shares, and so I initiated a position with that company as well. Now, due to my portfolio nearing 50 positions I’ll probably be initiating new positions at a much slower rate than before, choosing instead to add funds to the existing investments within the portfolio.

July was pretty interesting. Most of the month was this slow creep upward for the broader market, but it ended with a bang! The last week of the month was the worst weekly decline for the S&P 500 index in two years. I’ll be ready to allocate capital here as early as next week, so I’m hoping these cheaper prices hold out and I”m able to add to one of my positions in fairly quick order. DE is already cheaper than my entry price, so I’m excited to average down there.

The current market value of the Fund stands at $164,642.84, which is a 0.99% decrease over last month’s published value of $166,288.88. The broader market fell by over 1.5% for the month, and my portfolio was affected by my large exposure to a number of stocks that underperformed the broader market, some significantly so.

Stocks like The Coca-Cola Company (KO), Johnson & Johnson (JNJ), Aflac Incorporated (AFL), and Philip Morris International Inc. (PM), and BP Plc (BP) all saw fairly strong price depreciation during the last month. It’s a good thing I don’t compare my portfolio’s performance to the S&P 500 index! And I suppose it’s also a good thing that I look forward to stocks I own dropping in price.

If I wasn’t already heavily invested in all five of the above companies I’d give strong considerations to investing in any/all of them over the coming weeks. In fact, a part of me is flirting with the idea of adding to my KO position here, depending on capital availability. However, I have to be careful now that I no longer have the big income from my old dealership job. Can’t have it all in life!

I’ve already published my watch list for the coming month, and nothing has really changed. I’m stalking DE right now, and I’m highly likely to add to my position early in the month, as I feel the value that was already there has only become more apparent.

I’m currently invested in 49 companies. This is an increase since last month, since both of my recent investments involved initiating new positions with companies I hadn’t been previously invested in.

These updates are mainly designed to show the increase or decrease in the value of the underlying equities I’m invested in, but the main purpose of investing in dividend growth stocks is for the rising stream of dividends over time. So, with that said I don’t put too much emphasis on these monthly updates on the value of my portfolio. I think it is a good idea, however, to keep track of the rising (or falling) value of one’s securities and be aware of where they are in terms of the marketplace and whether or not certain stocks are attractively priced. It proves to be a useful exercise, for me at least, to update the values monthly. It gives me fresh perspective on which equities are performing well and which aren’t, and from there I can make educated decisions (based on further due diligence) on which stocks I’d like to add fresh capital to (while considering portfolio weight as well).

Full Disclosure: Long V, DE, KO, JNJ, AFL, PM, and BP.

How did July treat you? A good month for the portfolio? Add to some investments during the last week?

Thanks for reading.

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